Bond markets were weaker today with losses intact right from the start. There was brief respite heading into the afternoon, but then selling resumed, taking 10yr yields back to 2.60 and Fannie 3.5s as low as 102-05.
If much of the last two week's in May had seen a snowball of bond buying momentum, the last few trading sessions have seen the opposite. It's not quite as intense as the two main instances of positivity coming in the other direction, but the uphill snowball has had more staying power and covered more ground overall. In short, the last 4 days have been unpleasant.
The current environment is best thought of as a "volatile equalization" rather than a longer-term reversal in trend (2.57-2.60 was previously the lower end of the range, and we saw bounces at both those levels today). The tricky part about that is that it may indeed end up looking like a reversal in trend depending on the events in the coming days. If they move against us, rates could certainly continue higher.
All we know right now is that we're stretching the boundaries of the pre-ECB/NFP range. We don't know which way that range will break. Expect volatility to continue for better or worse.
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